Accumulate TCS; target of Rs 2225: Dolat Capital
Dolat Capital’s research report on TCS
The management is confident of strong growth in FY20 despite macro-economic challenges in the environment. The company signed TCV of USD 6.3bn during the quarter and TCV of USD 21.9bn for FY19 which gives us comfort for the growth trajectory in FY20. We expect a USD revenue growth of 9%/10% in USD terms for FY20/FY21, which factors in healthy growth in the BFSI vertical. The company maintained its aspirational margin band of 26%-28% despite visa rejection and talent shortage; we expect TCS to deliver margin towards lower end of its guidance. We downgrade our earnings estimate by 1.8%/6% for FY20/FY21 due revision in rupee assumption to ` 70 for FY20/FY21 (vs ` 72/` 74 for FY20/FY21 earlier).
However, we maintain our ACCUMULATE rating with a revised TP of ` 2,225 based on 22x (20x earlier) one-year fwd. PER. We upgraded our multiple on back of strong deal win and order book which will help company deliver healthy growth over the next two years.
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